Dubai’s bitcoin baby boomers bet large

A man feeds money into a bitcoin ATM in New York. The digital currency has surged in recent weeks, prompting fears of a bubble in the making, but that has not deterred a number of Dubai-based entrepreneurs investing in the digital currency. (Reuters)
Updated 11 December 2017
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Dubai’s bitcoin baby boomers bet large

LONDON: The lightbulb clicked in Ibrahim Barbour’s mind last winter.
After watching a YouTube series about global financial markets, the young Dubai professional started researching bitcoin, a phenomenon he had heard about in online forums and passing headlines. The more he learned, the more certain he became that bitcoin was a worthy investment.
“I liked what it had to offer,” said Barbour. “You’re in complete control of what you own, there is a limited supply of it so you can’t just print your way out of it like a government, and its value had been increasing for a while. So I said why not?”
Barbour joined a growing number of people across the Middle East and throughout the world who believe that digital currencies like bitcoin are as good — or better — than cash backed by a central bank.
His investment appears prudent: Since he bought his first coin in February of last year, the value of the digital currency has risen astronomically from $1,000 to more than $16,000 at the end of last week.
The spike in bitcoin prices has set the world of currency investing abuzz, and the Middle East is no exception. While funds across the region seem to be hedging their bets for the moment, a growing number of individuals like Barbour have joined the bitcoin rush, with many trying to hop on the fast-moving train.
Mohammed Alsehli, the founder of Dubai-based investors tech company ArabianChain, was an early adopter, buying his first bitcoins in 2011 when they were valued at just $3.
Like Barbour, Alsehli had grown disillusioned by the way traditional currencies were valued. “Today, currency is just backed by debt, that’s it,” he said.
When, following the financial crisis of 2008, a mysterious person or entity known as Satoshi Nakamoto developed a digital currency backed not by a central bank’s guarantee but by the trust of the user community, Alsehli grew curious.
The bitcoin cycle starts with miners: Individuals use computers with high processing power to execute complex mathematical equations.
Those calculations are used to verify the authenticity of transactions across the bitcoin network. As payment for their services, miners receive their welcome reward: bitcoin, which today is worth ten times more than gold.
Despite its meteoric rise, Alsehli said the technology is still in an early adoption phase, and still resides in the realm of esoterica for most people he speaks to. “If you ask somebody on the street how to buy a bitcoin, they don’t know.”
But new developments, including the first sale of bitcoin futures this weekend, mean that the currency is moving ever further into the mainstream.
In recent weeks, investors led by American hedge funds have been buying up the currency at a rapid rate, sending the prices soaring. Some fear it is a bubble that is doomed to burst. “There is a little bit of a gold rush going on, but it’s also justifiable, especially when it comes to bitcoin,” Alsehli said. While there are a number of cryptocurrencies on the market, bitcoin is the most mature and the most trusted.
Still, a series of digital heists over the years have plagued the currency. Just this week $64 million worth was stolen from a Slovenia-based digital coin exchange. If people start to lose confidence in the currency, sell-offs could send bitcoin prices plunging.
Regional experts said that while the prices of bitcoin may tumble in the short term, the long-run outlook is positive.
“I’m really bullish about bitcoin in the long run, even after this bubble will burst,” said Adam Schneider, a Dubai-based bitcoin expert and founder of the cybersecurity company Kitsune.
A nascent startup digital currency scene has begun to emerge across the Middle East centered around Dubai.
BitOasis, a platform for buying, selling and storing the currency, launched in Dubai in 2014. The company made waves when it announced that it had completed a first funding round in May 2016 with an undisclosed sum raised by investors. While few regional bitcoin startups have seen similar success, there is a buzz in the air.
“It’s everywhere — in any group chat I’m on about entrepreneurship, people are talking about bitcoin,” said Philip Bahoshy, the founder of MAGNiTT, an online community for MENA startups.
But he urged caution, saying that many regulatory questions remain unanswered across the region.
In October, as bitcoin prices started to jump, the UAE Central Bank issued cautionary advice to potential investors.
“Some nations have announced that they are not using bitcoin, and consequently its value sharply plummeted,” said the bank’s governor Mubarak Rashed Al-Mansouri.
Whether the price is up or down on a given day, it seems that bitcoin and similar digital currencies are here to stay. Those in the know are optimistic about the future.
“It is still in its infancy,” said Alsehli. “It’s just a baby — it hasn’t started crawling yet.”


China tariff threat could be a boon for Gulf oil exports

Updated 18 June 2018
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China tariff threat could be a boon for Gulf oil exports

  • Tariffs proposed for crude oil, coal and other energy projects.
  • China is the largest Asian customer for US crude.

LONDON: Gulf oil producers may benefit from China’s threat to impose import tariffs on US crude and other energy products, as key exporters meet to discuss production increases later this week.

China, one of the largest buyers of US crude oil surprised many late last week when it announced plans to tax such imports, as part of retaliatory measures following the decision by US President Donald Trump to impose $50 billion worth of tariffs on a variety of US goods.

The announcement comes as China looks for a different oil supply mix ahead of likely reductions in its imports from Venezuela and Iran.

Carsten Fritsch, a commodities analyst with Commerzbank, said that while China’s reduction of imports of Iranian crude should not be overestimated, the decline of production from Venezuela left the country with no choice but to seek alternative sources of oil.

“The US could could have been an alternative supplier but of course that won’t be the case if a 25 percent import tariff comes into effect,” Fritsch told Arab News.

“Some of the Arabian Gulf countries might have an advantage in plugging the gap, given the similarity of the crude types, and the same shipping lanes that would be used.”

China is currently the largest Asian customer for US crude; imports rose to 3.89 million metric tons in the first quarter of the year, compared with just 443,000 metric tons for the year ago period, according to figures from S&P Global Platts, with the US’s market share rising to 3.5 percent at the end of March.

American crude has proved competitive for China; the US benchmark WTI averaged a $1.83 per barrel discount to oil from the North Sea Forties on a delivered basis into China in May, and a 74 cents per barrel discount to Abu Dhabi’s Murban crude, according to S&P Global Platts calculations.

But China is likely to find it easier to replace US crude imports than US producers will to get new customers, according to Thomson Reuters commentator Clyde Russell.

“It’s not hard to imagine a scenario in which China encourages Saudi Arabia and Russia, the world’s top oil exporters and partners in the agreement to restrict output, to pump more crude,” said Russell yesterday.

“China would then buy the additional Saudi and Russian output, using it to replace cargoes from the US, and even from Iran, assuming the renewed US sanctions against Iran force Beijing to curtail imports.”

The prospect of restrictions on US oil come ahead of a meeting of OPEC and other oil producers in Vienna later this week, with an increase in oil production seen as increasingly likely following the eradication of oversupply and the recovery of prices.

Oil prices were up around 1.5 percent yesterday afternoon, on reports from Bloomberg that producers were considering increasing output by between 300-600,000 barrels per day, compared with a 1.5 million barrel per day initially sought by Russia.

In addition to tariffs on oil, China has also threatened imports on other energy sources, notably coal, in a bid to hurt Trump politically as well as economically.

“Coal miners count among Trump’s most vocal backers, but if China does stop buying US coking coal, it may force producers to accept lower prices from other buyers in order to move cargoes,” said Russell.

“The Chinese have probably calculated that they can take the pain from a trade conflict longer than Trump can, or at least longer than the US. economy, companies and workers will be prepared to tolerate.”